looking at the facts, that the parties did not necessarily contemplate CH. XVII. s. 1. future advances, the guarantee will be void (m). General Nature of Contract of Guarantee. tion need not be direct. It must be borne in mind, however-as was observed by Best, C.J., in the case of Morley v. Boothby (n)-that "no Court of Common Law has ever said, that there should be a consideration Consideradirectly between the persons giving and receiving the guarantee. It is enough if the person for whom the guarantor becomes surety receives a benefit, or the person to whom the guarantee is given suffer inconvenience, as an inducement to the surety to become guarantee for the principal debtor." SECT. 2.-Implied Indemnities. mise to indemnify is implied by law, and see In many cases the law implies a promise to indemnify. Thus, When a prowhere there is a parol demise by a lessee to an under-tenant, there is an implied promise by the former to the latter, to indemnify him against any distress which may be made by the superior landlord, for the rent due to him-so long, at least, as the undertenant pays his rent to his immediate landlord (o). So, if A. become surety or bail for B., at his request, the law implies a promise by B. to indemnify him (p). So where A. entered into a recognizance of bail for B., on the removal by certiorari of an indictment for conspiracy, from the Central Criminal Court to the Court of Queen's Bench; and B. was convicted, and the recognizances estreated for the non-payment of the prosecutor's costs: it was held that A. might sue B., as upon an implied indemnity (q). So there is, even at law, an implied contract between sureties, to contribute equally in discharging the demands for which they become responsible for their principal (1). And so as regards bills of exchange and the respective and mutual rights and liabilities of holders, drawers, acceptors and indorsers it was laid down by Lord Selborne, L.C., in the House of Lords (s), that though there was no contract for suretyship between them, yet there was "a primary and secondary liability of two persons for one and the same debt, the debt being as between ante, p. 38. Bills of exchange. CH.XVII.s.2. the two, that of one of those persons only, and not equally of both, Implied so that the other, if he should be compelled to pay it, would be Indemnities. Implied indemnity. Right of the party indemnified to recover costs. No contribution amongst wrongdoers. entitled to reimbursement from the person by whom (as between the two) it ought to have been paid. . . . The liability of the indorser to the holder is by law merchant conditional, and only secondary; but, when the conditions required by that law are fulfilled, it becomes absolute, and is that of a principal; and the indorser's right, if he pays the holder, to recover over against the acceptor, is not founded on any agreement between him and the acceptor (who is as likely as not to be a stranger without any communication with him before the indorsement), but is established by the same law." The respective duties of a holder are now regulated by sects. 38-52, and the liabilities of acceptors, drawers, and indorsers by sects. 53-57 of the Bills of Exchange Act, 1882, 45 & 46 Vict. c. 61 (ante, Ch. XVI.). The law implies a promise on the part of the principal, to indemnify his agent against any liability which he may incur from the execution of his authority (t); but there cannot be an implied contract to indemnify, in any case where the party has entered into an express contract as to the same subject-matter (u). Where a party is either expressly or impliedly indemnified against the demand of a third person, he has no right, without express authority, to defend an action by the latter, and then to claim the costs of such defence from the surety; unless, in defending the action and incurring such costs, he has acted as a reasonable and prudent man, unindemnified, would have acted in his own case (x). And a defendant who has a claim to contribution or indemnity over against one who is not a defendant, can bring him in by the third party procedure (y), and in the same way a defendant claiming indemnity or contribution from a co-defendant may have such question determined in the action (2). The general rule is, that there is no contribution amongst wrongdoers; so that where one man does an act at the instance of another, which the former must be taken to have known to be against law, even an express promise to indemnify him is void (a). (t) Westropp v. Solomon (1849), 8 C. B. 345. (u) Ante, p. 42. And see Upton v. Fergusson (1833), 3 M. & Sc. 88. (x) Broom v. Hall (1859), 7 C. B., N. S. 503. Where the action has been properly defended, the indemnity covers the whole costs, and not merely the taxed costs of the defence; Howard v. Lovegrove (1870), L. R., 6 Ex. 43; and see also as to "reasonably defending," Hammond v. Bussey (1887), 20 Q. B. D. 79, C. A. (y) R. S. C., 1883, Ord. XVI., rr. 48— 55; and see notes thereto in the Annual Practice. (z) R. S. C., 1883, Ord. XVI., r. 55. (a) See Merryweather v. Nixon (1799), 8 T. R. 186; 16 R. R. 810; Clerk aud Lindsell on Torts, 3rd ed., p.60. SECT. 3.-Requirement of Signed Writing by Statute of Frauds. (a) Application of Statute to Collateral Engagements only. The Statute of Frauds, 29 Car. 2, c. 3, s. 4 (p. 76, ante), provides "that no action shall be brought, whereby to charge the defendant upon any special promise to answer for the debt, default, or miscarriage of another person, unless the agreement upon which such action shall be brought, or some memorandum or note thereof, shall be in writing and signed by the party to be charged therewith, or some other person thereunto by him lawfully authorised" (b). Let us, first, consider to what cases this statute applies. CH. XVII. s. 3. Guarantees (Statute of Frauds). Guarantees writing by the Statute must be in of Frauds. of statute It is clearly settled that the statute applies only to collateral Application engagements; and that it has not, either in its words or principle, to collateral any reference to cases where there is an original promise to pay a engagements only. debt or satisfy a demand or damages, for which no other person Lakeman v. was intended or expected to be responsible (c). As it is put in Mountstephen. the headnote to the leading case of Birkmyr v. Darnell (d): "A Birkmyr v. Darnell. promise to answer for the debt, default, or miscarriage of another, for which that other remains liable, must be in writing to satisfy the Statute of Frauds. Contra, where the other does not remain. liable." Therefore where the defendant undertook that a horse to be delivered to A. by the plaintiff, should be re-delivered safe by A. to the plaintiff, this was held a collateral undertaking, for "where the undertaker comes in aid only to procure a credit to the party, in that case there is a remedy against both, and both are answerable according to their distinct engagement; but where the whole credit is given to the undertaker so that the other party is but his servant, this is not a collateral undertaking" (e). The statute, however, applies as well to contracts to be answerable for the debt of another, as to engagements to satisfy damages recovered or recoverable against another; and it is not necessary that the third party should have requested the person giving the guarantee to enter into the engagement, or that he should be in any manner a party thereto. The question, therefore, whether any particular case comes within this clause of the statute, depends on whether the result of the contract is, to create any primary liability on the part of the defendant (ƒ). And accordingly it is held, that if the person for whose use 'goods are furnished upon the defendant's guarantee, be liable to the vendor, the defendant's engagement, though it (b) The 6th section of the Mercantile Law Amendment (Scotland) Act, 1856, 19 & 20 Vict. c. 60, is similar to this. (c) Lakeman v. Mountstephen (1874), L. R., 7 H. L. 17. (d) Birkmyr v. Darnell (1705), Salk. (e) Birkmyr v. Darnell, supra. When the engagement is collateral within the statute. Guarantees (Statute of Frauds). CH. XVII.8.3. may have been the chief inducement to the plaintiff to supply the goods, is collateral, and must be reduced into writing (g). Thus, where the plaintiff was induced to send goods to a person with whom he was unacquainted, by the defendant's verbal promise that "he would see the plaintiff paid;" and the plaintiff debited the party receiving the goods; it was held that the defendant's promise was within the statute: and the Court overruled a distinction which had formerly been taken, between a promise to pay given before, and one given after the delivery of the goods (h); and held that the statute applied in all cases, where the person for whose use the goods are supplied is liable at all (i). Nature of must be ascer- The statute does not apply where guarantor originally liable. Whether the engagement was original or collateral-that is, whether it was binding on the party in the first instance and at all events, or only in case the other party made default-depends on the contract between the parties (k). And this is to be collected, not merely from the particular words of the defendant's promise, but from the general circumstances of the transaction. Thus, where an action was brought against a lieutenant in the navy, to recover 5761. for clothes, &c., supplied to the crew of his ship; and the promise was, "to see the plaintiff paid at the paytable;" the Court-in deciding that this was a collateral engagement, and therefore within the statute-relied on the improbability that the defendant, considering his situation, could have intended to render himself primarily responsible for so large a sum; and they thought that, from the nature of the case, the plaintiff must have relied on the power of the officer over the fund out of which the men's wages were to be paid, and have given credit to that fund rather than to the defendant (I). 66 And where A., at the request of B., entered into a recognizance of bail for the appearance of C., to answer a criminal charge; it was held that this was not a promise to answer for the debt, default, or miscarriage, of another person," within the statute (m). (b) Non-application of Statute where Guarantor originally Liable. The statute does not apply, if the defendant were himself, either alone or jointly with others, originally liable for the demand which forms the subject of his subsequent promise (n). (1834), 2 C. & M. 430. (g) Per Bayley, B., Simpson v. Penton (1834), 2 C. & M. 430. (h) See per Lord Mansfield, C.J., Jones v. Cooper (1774), Cowp. 227. (i) Matson v. Wharam (1787), 2 T. R. 80; 1 R. R. 429; and see Anderson v. Hayman (1789), 1 H. Bl. 120; 2 R. R. 734. (k) Per Bayley, B., Simpson v. Penton (1) Keate v. Temple (1797), 1 B. & P. 158. (m) Cripps v. Hartnoll (1863), 4 B. & S. 414, Ex. Ch. ; reversing the decision of the Court of Queen's Bench in S. C., 2 B. & S. 697. (n) See Sutton v. Grey, [1894] 1 Q. B. 285. Guarantees (Statute of Frauds). Contourier v. Grey. This appears from Coutourier v. Hastie (o), in which the statute CH. XVII. s.3. was held not to apply to an agent buying goods on del credere commission (see ante, p. 222) and from Sutton v. Grey (p). In the latter case the plaintiffs, who were stockbrokers, agreed orally with the defendant, that he should introduce clients to them and Hastie. that they should transact business on the Stock Exchange for Sutton v. the clients so introduced on the term that the defendant should receive half commission and pay the plaintiffs half the losses on the transactions. It was held that the agreement was valid though oral, so as to entitle the plaintiffs to recover half of a particular loss, on the ground that the defendant had an interest in the transactions equally with the plaintiffs (p). It had been already ruled that if the original credit was given to the defendant, then, although the goods were delivered to or for the use of another person, the statute does not apply (q). An agreement to convert a separate into a joint debt, is not within the statute; the effect of such agreement being to create a new debt, in consideration of the former being extinguished (); though the statute applies if the original demand be allowed to subsist, and the parties merely stipulate for an indulgence to the debtor-such as, that an action commenced shall be stayed (s). If the third party be not by law liable for the demand-as in Promise made the case of goods, not being necessaries, furnished to an infant- for infant, &c. the defendant's promise cannot be considered as collateral, and consequently need not be in writing (t). To whom the promise must be made. The statute applies only to promises made to persons to whom another is already, or is expected to become liable; and the promise must be, to be answerable for a debt of, or a default in some duty by that other, towards the promisee (u). Therefore, a promise by the defendant to the plaintiff, to pay to A. B. a debt due from the plaintiff to A. B., is not within the statute (x). A promise by a surety to a third person, to indemnify him if Promise by he also will become surety for the principal, is not within the statute (y); nor is a promise by the defendant, in consideration of the plaintiff accepting certain bills of exchange, to indemnify him. from liability to make payments in respect of such bills (z). (0) Coutourier v. Hastie (1853), 8 Ex. 40. (p) Sutton v. Grey, [1894] 1 Q. B. 285, C. A. (q) Croft v. Smallwood (1793), 1 Esp. 121; and see per Abbott, C.J., Edge v. Frost (1824), D. & R. 243; Dixon v. Hatfield (1825), 2 Bing. 439. (r) Ex parte Lane (1846), 1 De Gex, 300. (8) Fish v. Hutchinson (1759), 2 Wils. 94; King v. Wilson (1731), Str. 873. (t) Harris v. Huntbach (1757), 1 Burr. 373; and see Duncombe v. Tickridge (1848), Aleyn, 94. (u) See Mountstephen v. Lakeman (1874), L. R., 7 H. L. 17. (x) Eastwood v. Kenyon (1840), 11 A. & E. 438. (y) Thomas v. Cook (1828), 8 B. & C. 728; approved in Guild v. Conrad, [1894] 2 Q. B. 855, C. A. (z) Guild v. Conrad, [1894] 2 Q. B. 885, C. A. surety. |